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Full text of "ANNUAL REPORT - ONTARIO ENERGY BOARD 1972"

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Ontario 



THIRTEENTH ANNUAL REPORT 

OF 
THE ONTARIO ENERGY BOARD 



YEAR ENDING DECEMBER 31, 1972 



o .1 



THIRTEENTH ANNUAL REPORT 



OF 



THE ONTARIO ENERGY BOARD 



YEAR ENDING DECEMBER 31, 1972 



Digitized by the Internet Archive 
in 2013 



http://archive.org/details/annualreportonta1972onta 



AREA CODE -416 {POMiS 790 BAY STREET 

TELEPHONE -(|65-2851 J^SJSQ, TORONTO 1{ 

ONTARIO 



M5G INS 



ONTARIO ENERGY BOARD 



February 1, 1973 



j Honourable Leo Bernier, 

' Minister of Natural Resources, 

Parliament Buildings, 
| Toronto, Ontario. 



Sir: 



I have the honour to present herewith the Annual Report 
of the Ontario Energy Board for the calendar year 1972. 



Respectfully submitted, 



^OjfJJZeh. Uo Sv\ 



S. W. Clarkson 
Chairman 



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INTRODUCTION 

This report, submitted in accordance with section 9 
of The Ontario Energy Board Act, summarizes the activities 
of the Ontario Energy Board for the calendar year ended 
December 31, 1972. 

The Board acts under the authority of The Ontario 
Energy Board Act, sections 4, #, 9 and 10 of The Municipal 
Franchises Act, and certain sections of The Petroleum 
Resources Act, 1971, The Public Utilities Act and The 
Assessment Act. 



COMPOSITION OF THE BOARD 

Mr. Stuart W. Clarkson was appointed to the Board 
as its Chairman, effective September 20, 1972. The other 
members of the Board are Mr. A. B. Jackson, Mr. I. C. MacNabb 
and Mr. D. M. Treadgold. 

The principal members of the Board staff are the 
Secretary, the Energy Returns Officer and the Deputy Energy 
Returns Officer, the Board Engineer, and the Supervisor of 
the Energy Studies Section. The latter was on loan to the 
Advisory Committee on Energy throughout 1972. 



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FUNCTIONS OF THE BOARD 

The major functions of the Board are as follows: 

a) Under The Ontario Energy Board Act 

Approving and fixing the rates and charges for 
the sale, transmission, distribution and storage 
of gas in the Province. 

Ensuring compliance by gas companies with the 
Uniform System of Accounts for Gas Utilities. 

Granting leave to construct transmission pipe 
lines, production lines, distribution lines and 
stations. 

Granting authority to expropriate land for pipe 
lines and stations. 

Recommending the designation of lands as gas 
storage areas and reporting on applications for 
permits to drill wells in such areas. 

Authorizing gas storage operations in designated 
gas storage areas. 

Requiring and regulating the joining of interests 
in gas or oil pools, and apportioning the benefits 
of operation therein. 

Hearing and reporting to the Lieutenant Governor 
in Council on proposals of gas companies to sell 
their systems, amalgamate with other companies, or 
acquire shares of other gas companies. 

Examining and reporting on any matters pertaining 
to energy referred to the Board by the Lieutenant 
Governor in Council. 



b) Under The Municipal Franchises Act 

Approving terms and conditions of municipal gas 
franchise agreements, renewing or extending 



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expired gas franchises or denying renewals or 
extensions if not in the public interest. 

Granting certificates of public convenience and 
necessity for the supply and distribution of gas 
in municipalities. 



c) Under The Petroleum Resources Act, 1971 

Examining and reporting on certain matters 
referred to the Board by the Minister of Natural 
Resources. 



GENERAL ADMINISTRATION 

The Advisory Committee on Energy having been set up 
by the Government in 1971 to undertake a thorough review 
of matters respecting energy, the Board's Supervisor of its 
Energy Studies Section was loaned to the Committee in 1971 
and remained with it throughout 1972. The more routine 
statistical and other studies continued to be made by the 
small staff of the Energy Studies Section attached to the 
Board. 

The Energy Returns Officer and his staff carry out 
continuous surveillance of accounting records of gas 
companies under the jurisdiction of the Board. This work 
assumed particular importance during 1972 because of the 
likelihood that the major gas distributors will apply for 
approval of new rates in 1973. 



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Proceedings before the Board are open to the public 
and, subject to certain limited exemptions, a public 
hearing is held before any Order is made. The legislation 
provides that Board decisions may be appealed to the Court 
of Appeal and reviewed by the Lieutenant Governor in Council. 
Additional appeal provisions were established by the 
Legislature in 1971 upon the enactment of The Judicial Review 
Precedure Act, 1971. 

Late in December, 1972, the owners of certain lands 
in the City of Windsor appealed from Orders of the Board 
respecting the location of a high-pressure gas pipe line 
and the expropriation by Union Gas Limited of an easement 
therefor on the lands of the Appellants. The appeal was not 
heard before the end of the year and, as of the date of this 
Annual Report, the decision of the Court is not known. 

In accordance with its usual practice, the Board 
held hearings at locations convenient for the Applicants and 
other interested parties. Although most hearings were held 
in Toronto, hearings were also held during 1972 at Mount 
Forest, Cayuga, Sarnia, Windsor, Chatham, Woodstock and 
Guelph. 

There were no amendments made to The Ontario Energy 
Board Act during 1972, nor were any new Regulations made 
under the Act. 



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HEARING STATISTICS 

The Ontario Energy Board Act 

Gas Rates and other charges for gas 26 

Miscellaneous Orders 11 

Leaves to construct transmission pipe lines . . 5 

Land expropriations for pipe lines $7 

Drilling of wells in gas storage areas 

(referred by Minister) 4 

The Municipal Franchises Act 

Approval of gas franchise agreements 

(section 9) 2 

Certificates of public convenience and 

necessity (section 8) 3 

133 



RATES 

The year 1972 was one of anticipation of gas rate 
revisions which, however, did not take place and are now 
expected in 1973. The major supplier of gas to Ontario dis- 
tributors, TransCanada PipeLines Limited, has had approval 
from the National Energy Board for substantial increases in 
its revenues but hearings on the particular rates designed 
to achieve the approved revenue increase were not completed 
in 1972. When new rates are approved, it is expected that 
the Ontario distributors will have to bear very substantially 



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increased gas costs and will then seek important revisions 
in the rates charged to their customers. This will place a 
heavy burden of investigation upon the Board and the Board 
has encouraged the distributors to do as much advance 
preparation as possible in order that the issues may be 
clear and the several hearings carried on expeditiously and 
fairly to all concerned. 

The Board recently reviewed the earned return and 
rates to customers of Northern and Central Gas Corporation 
Limited. In its decision the Board provided that the 
proceedings would be kept open "so as to enable the Appli- 
cant to submit for the approval of the Board, without 
redetermination of rate base and rate of return, rate 
schedules designed to pass on to the Applicant's customers 
all or part of any increased gas costs resulting from an 
Order of the National Energy Board made before the end of 
1972." 

The above reference to increased gas costs relates 
to the application of TransCanada PipeLines Limited to the 
National Energy Board for approval of increases in the rates 
charged by it to distributors. The hearing was not completed 
in 1972 and accordingly no Order was made during that year. 
The Ontario Energy Board has before it an application of 
Northern and Central Gas Corporation Limited to permit it 
to exercise the special rights granted to it by the Board 



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in its earlier decision if the Order of the National Energy- 
Board is made before the end of April, 1973. 

In addition to the major rates case mentioned above, 
the Board dealt with a number of rates applications of lesser 
importance. Many of these were of a limited nature, e.g. 
the introduction of large-volume industrial rates to new 
areas. Others were for rate approval on an interim basis, 
pending final determination by the Board. 

One of the interim Orders is of particular interest. 
Tecumseh Gas Storage Limited, half of whose common shares are 
owned by its principal customer, The Consumers' Gas Company, 
carries on a large-scale gas storage operation in Lambton 
County for gas transmitters and distributors. It has had, 
and continues to have, substantial reserve capacity and the 
steadily increasing use of the storage pool has resulted in 
reductions of unit costs of storage. The company's rates 
are approved by the Board on an interim year-to-year basis 
and the Order for 1972-1973, in recognition of the reduction 
in unit costs, provided for a reduction in storage charges 
of about 5$. 



ACCOUNTING ORDERS 

During the year, a number of issues in matters of 
accounting were settled by the Board in accordance with 
the Uniform System of Accounts prescribed for use by gas 



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distributors. The Consumers' Gas Company completed a study 
on the accounting treatment of certain acquisitions made 
by it since 1955. After review by the staff of the Board, 
changes were ordered by the Board and given effect to in 
the company's 1972 financial statements. The matters were 
explained in considerable detail in Reasons for Decision 
issued by the Board. 

Some relatively minor matters with respect to the 
accounts of Union Gas Limited and United Gas Limited were 
also settled by the Board in accordance with the Uniform 
System of Accounts for Gas Utilities. 

In the Annual Report of the Board for 1971, reference 
was made to important accounting Orders of the Board, as 
follows :- 

"Pending a final decision of the National 
Energy Board on the application to it, the 
Ontario utilities agreed to pay TransCanada 
an additional 2.10 per Mcf for all gas de- 
livered beginning January 1, 1972. At their 
request, accounting Orders were issued by 
this Board permitting them to defer the 
supplemental cost of gas supply in their 
accounts pending the N.E.B. decision and 
future consideration by this Board." 

The decision of the National Energy Board has not yet been 
made and accordingly the accounting Orders referred to are 
still in effect. 



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PIPE LINE CONSTRUCTION AND EXPROPRIATION 
OF EASEMENTS THEREFOR 

The Ontario Energy Board Act prohibits the construc- 
tion of a gas or oil transmission pipe line without leave 
of the Board. If leave to construct a pipe line has been 
granted, the Board may also grant authority to expropriate 
land for the purpose of the pipe line. 

The cases in 1972 where the Board authorized pipe 
line construction varied in importance, but several call for 
comment . 

Leave was granted to Northern and Central Gas Corp- 
oration Limited to loop its gas transmission line serving 
the Sudbury area. Looping of the line was required in order 
to enable the company to meet the expanding needs of customers 
in the area and involved the construction of approximately 
55 miles of 12" pipe line. 

Leave was granted to The Consumers' Gas Company to 
loop its 4" Lindsay lateral with approximately 10 miles of 
6" gas pipe line in order to reinforce the facilities serving 
Lindsay and Peterborough. Leave was also granted to the 
company to construct approximately 9 miles of 4" line to 
serve newly-authorized areas at and in the vicinity of Port 
Perry. 

Leave was granted to Union Gas Limited to construct 
about 10 miles of 24" gas pipe line between its Dawn compressor 



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station and the newly-authorized Bickford gas storage 
area. Other construction authorized during the year was of 
relatively minor importance but easement acquisition or line 
construction was carried out on major projects previously 
authorized, involving the Board in incidental matters - in 
particular a large number of expropriation proceedings. 
These projects included the final stages of looping of the 
Dawn Township-Windsor line, at the Windsor end, with 
22. & miles of 20 M pipe, the North Guelph line comprising 
about 8 miles of 12" and B" pipe, and looping of the Waterloo- 
Owen Sound line comprising about 15 miles of 10" pipe. 

As in previous years a special pipe line inspector 
was appointed to act as liaison between the landowners and 
the pipe line companies during construction and clean-up 
periods and to ensure compliance with any terms and conditions 
of Board's Orders related to the construction. 



GAS STORAGE MATTERS 

The Board is responsible in several respects for 
control of gas storage and, among other things, makes recom- 
mendations to the Minister with respect to applications for 
permission to drill wells in designated gas storage areas. 

During 1972 Tecumseh Gas Storage Limited, in accordance 
with the Board's recommendations, was permitted to drill 
nine wells in the Kimball-Colinville pool (two of which were 



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replacements for wells that turned out to be dry holes). 
The purpose was to develop deliverability in order to meet 
an increasing contractual commitment to The Consumers' Gas 
Company. 

After lengthy hearings the Board, early in 1972, 
authorized Union Gas Limited to inject, store, and remove gas 
in and from the Bickford and Sombra designated gas storage 
pools. The working storage capacity of these two pools is 
approximately 15.9 Bcf. Later in the year, in accordance 
with the Board's recommendations to the Minister, permits 
were granted to the company to carry out its five-well 
drilling program for 1972 in these pools. 



JOINING OF INTERESTS FOR THE PRODUCTION OF GAS OR OIL 

The Board is empowered by section 24(c) of The Ontario 
Energy Board Act to: 

"require and regulate the joining of the 
various interests within a field or pool 
for the purpose of drilling or operating 
wells, the designation of management and 
the apportioning of the costs and the 
benefits of such drilling or operation." 

During 1972 the Board made an Order joining the 
interests in the Rosedale Pool, in the Township of Enniskillen, 
County of Lambton. The pool contained about 2 Bcf of gas, 
an important addition in a time of tight gas supplies in 
Ontario. Union Gas Limited, which held all the oil and gas 



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rights exclusive of a municipally-owned road allowance, 
was named manager of the unit operation. The terms for the 
joining of interests brought very substantial advantages to 
lessors whose lands contained gas and left other lessors at 
least as well off as under their contractual rights. 



APPROVALS AND CERTIFICATES 

The Board approved the terms and conditions of two 
gas franchise agreements, each being between a gas distributor 
and a municipality not formerly served with gas. The Board 
issued certificates of public convenience and necessity for 
three municipalities (Village of Port Perry, Townships of 
Reach and Wabigoon) where distribution facilities were to 
be constructed during 1972. 

In addition to the above authorizations for gas service 
to new areas, approval was given to a new franchise granted 
by the Town of Bowmanville to The Consumers' Gas Company. 
This followed upon settlement of a dispute, originating in 
the terms of an earlier franchise which expired in 1966, as 
to ownership of the gas system installed by The Consumers' 
Gas Company or its predecessor under that earlier franchise. 

DISCONTINUANCE OF GAS SERVICE 

Under the provisions of section 25 of The Ontario 



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Energy Board Act, "no distributor shall voluntarily discon- 
tinue distributing gas by pipe line to a consumer without 
leave of the Board." During 1972 two applications were made 
to the Board under this section. 

On March 3, 1972, Grand River Gas Limited applied for 
leave to discontinue all service from its gas distribution 
system in the Township of Cayuga in the County of Haldimand, 
stating that "because of the need to replace the system, the 
lack of an adequate supply of gas from the Applicant's own 
wells and the inability of the Applicant to obtain help for 
operating the system, the Applicant sees no prospect of 
being able to continue operations on any satisfactory basis." 
After a thorough investigation, including a public hearing 
in the area, the Board could find no practical alternative 
and made an Order granting leave to discontinue on July 31 > 
1972, but on condition that the Applicant furnish each 

customer with his normal gas requirements free of charge 
after May 1, 1972, until discontinuance of service. 

Later in the year, Union Gas Limited applied for leave 
to discontinue gas service from a number of its lines in the 
Townships of North Cayuga, South Cayuga, Walpole, Dunn and 
Rainhara, in the County of Haldimand, serving about 260 custom- 
ers. The lines in question were originally laid as production 
lines but, because of declining production in the wells, are 
no longer required or used for that purpose. The application 



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states that the lines must be replaced if they continue to 
be used for distribution mains and that replacement is 
uneconomic. The application also states that "alternative 
sources of energy are readily available and the Applicant 
has made offers of compensation to all customers affected . . . 
which are designed to assist such customers to convert to 
alternate fuels." Pursuant to a Notice of Hearing issued by 
the Board, the application came on for hearing at Cayuga 
on November 16, 1972, but at the opening of the hearing an 
adjournment was granted and the application will come on 
again for hearing early in 1973. The Lieutenant Governor 
in Council has appointed an expert on pipe corrosion to 
assist the Board and it is expected that his evidence will 
be presented at the hearing. 



CONCLUSION 

The Board continues to keep in close touch with the 
proceedings before the National Energy Board and other 
developments that may affect the terms and conditions under 
which gas is delivered to Ontario distributors.